Go Back to Drawing Board on OCS NOPR, FERC Told
Neither the interstate pipelines nor gas producers were
particularly enamored with FERC's latest attempt to create a more
balanced, lighter-handed system for regulating gas pipelines on the
Outer Continental Shelf (OCS). They both agree the Commission fell
short of its goal in the July proposed rulemaking.
But that's where the similarity ends because the pipes and
producers have interpreted the Commission's notice of proposed
rulemaking (NOPR) dealing with OCS regulation differently. The
pipelines are threatened by it because they believe the NOPR could
subject jurisdictional OCS systems, which currently are regulated
under the Natural Gas Act (NGA), to another layer of regulation
under the Outer Continental Shelf Lands Act (OCSLA). This would
compound their regulatory burden because they would be forced to
comply with reporting requirements under both laws, the Interstate
Natural Gas Association of America (INGAA) told FERC last week
The pipeline group urged the Commission to clarify the rule to
eliminate the possibility of "duplicative" reporting requirements.
"Our idea is that your compliance with [the reporting requirements
of] the Natural Gas Act as a pipeline is so extensive that that
compliance should be deemed to be sufficient" under the OCSLA, said
Lorraine Cross, senior vice president at INGAA.
But gas producers don't view the NOPR as proposing the doubling
of regulation for jurisdictional OCS pipelines. Rather, the
Commission in the NOPR and in its remand decision on Sea Robin
Pipeline "seems to be jettisoning its NGA authority" over
jurisdictional OCS pipelines entirely in favor of an "OCSLA only"
regime in the offshore, according to the Natural Gas Supply
The producer group contends this is contrary to what Congress
intended for the OCSLA. Congress meant for the OCSLA to be
"complementary" to NGA regulation "rather than mutually exclusive."
The NGA gives the Commission authority over rates and terms and
conditions of service, while the OCSLA was designed to "facilitate
the orderly development of OCS reserves, and to prevent
discrimination," the NGSA said.
In the event the Commission adopts the policy proposed in the
NOPR and Sea Robin remand, producers believe certain "protective
conditions" should be put in place to mitigate the regulatory risks
associated with the change in OCS regulation. These would include
protection against rate shock, implementation of effective
complaint procedures, a requirement that OCS pipes provide
information (on rates, tariff terms and conditions and cost
structure) on a periodic basis, and a requirement that formerly NGA
jurisdictional pipes provide default contracts to ensure rate and
service continuity, the NGSA said.
While producers advocate both NGA and OCSLA regulation for
offshore jurisdictional pipelines, they strongly object to any form
of regulation for producer-owned OCS pipelines. The NOPR would
subject such pipes, which heretofore have been free of any
regulation, to OCSLA oversight. "Asserting regulatory jurisdiction
over production-related lines, platforms, services, facilities and
agreements would create confusion, increase costs and establish a
new category of regulatory risk that should not burden the already
risky, expensive, complex and difficult endeavor of finding,
developing and producing natural gas and crude oil on the OCS,"
With the new, expedited complaint process in place, which
applies to disputes arising under the OCSLA, INGAA believes the
Commission can achieve a light-handed regulatory regime in the OCS
without imposing a reporting requirement on pipelines. It noted
FERC already does this for offshore oil pipelines.
But by itself, INGAA said the Commission's NOPR "does nothing to
achieve a uniform, light-handed regulatory regime on the OCS."